Oil Layoffs Could Come Back To Haunt The Industry

on February 10, 2015 at 3:30 PM

Unemployed Americans line up to enter a

The fall to six-year lows in oil prices has been swift and unexpected. The pace of energy sector layoffs in recent weeks has been similarly quick, if not so surprising.

Job cuts are inevitable as oil and gas companies watch commodity prices tumble, but layoffs today could have significant ramifications for the sector tomorrow. For a variety of reasons specific to the industry, energy companies could find themselves in a situation later where skilled workers are hard to replace.

The rise in pink slips at oil-related enterprises sent overall job cuts in January soaring 40 percent from the previous month, to a nearly two-year high, Challenger, Gray & Christmas reported last week. The firm attributed 21,322 layoffs last month to falling crude prices, compared with 14,262 total cuts in 2014.

“We’re absolutely seeing a slowdown. There are pockets of activity, but the industry has not just tapped the brakes, but hit them pretty hard,” said Jeff Bush, president of Fort Worth, Texas-based oil and gas consultant CSI Recruiting.

There is no crisis yet, but the picture is significantly different from three months ago, he said. Large independent oil and production companies are on lockdown, issuing hiring freezes and closing branch offices.

The downturn among contract workers is likely just the beginning. When producers terminate contracts or allow them to expire, the next step is usually cuts in other personnel areas, Bush said.

Read the remainder of this article on CNBC’s website…